On August 4, 2016, the IRS released Notice 2016-48 outlining the renewal procedures pertaining to the implementation of the changes to the ITIN process as required by the PATH ACT, passed in December 2015. There were also changes to requirements for dependents.
Only ITIN holders who need to file a tax return may need to renew. Others with ITINs for information returns or say for certain IRS waiver forms used for a reduction or waiver in withholding tax, do not have to renew. Note that most of these waiver forms require a 3-year resubmission to the payor of the particular income to which the tax withholding waiver relates.
ITINS issued after 2012
The new law will invalidate an ITIN issued to a taxpayer if a federal tax return has not been filed at least once in the last three years unless renewed by the taxpayer. This means, ITINS issued after 2012 and not used for tax returns in either 2013, 2014, or 2015 will expire as of January 1, 2017. The renewal period starts on October 1, 2016.
If you have been filing tax return annually, such as Canadian filing U.S. 1040X returns reporting their net rental income from U.S. real estate, the ITIN does not have to be renewed. However, say you have an ITIN issued to you when you acquired the U.S. condo but never filed a return because there was no rental or you sold the condo but then acquired a new property 4 years later, you will then need to reapply for a new ITIN.
ITINS issued before 2013
ITINs issued before 2013 that have been used in filing a tax return, regardless if you filed a return for any taxation year, the ITIN will have to be renewed this October. The first ITINs that will expire are those with middle digits 78 and 79. The IRS will mail letters to this group informing them of the renewal process. The schedule for expiration of ITINs that do not have middle digits of 78 and 79 will be announced at a future date.
Dependents from countries other than Canada or Mexico
Beginning October 1, 2016, the IRS will not accept passports for dependents that do not have a date of entry into the U.S., as a stand-alone identification document or dependents of military members overseas.
Affected applicants will have to submit either U.S. medical records for dependents under age six or U.S. school records for dependents under age 18 along with the passport. Dependents over age 18 can submit a rental or bank statement or a utility bill listing the applicant’s name and U.S. address, with their passport.
Contact your professional advisor prior to implementing any of the outlined strategies.
Internal Revenue Service Circular 230 Disclosure
Pursuant to Internal Revenue Service Circular 230, we hereby inform you that the advice or information set forth herein with respect to U.S. federal tax issues was not intended or written to be used, and cannot be used, by you or any taxpayer, for the purpose of avoiding any penalties that may be imposed on you or any other person under the Internal Revenue Code.